In the wake of Mr. Einhorn's divisive statements,
Microsoft issued no formal comment. However, Reuters, who first
reported on Mr. Einhorn's comments,saidthat a
source close to the board says that the board stands firmly behind Mr. Ballmer.

Microsoft's board has nine members, including
chairman, company founder, and former CEO Bill Gates. Mr. Gatesstepped
down from CEO in 2000to make room for Mr. Ballmer, a veteran since Microsoft
earliest years, to step up. It's thought that if anyone could and would
tell Mr. Ballmer to leave it would be Mr. Gates. States a hedge fund
manager at one of Microsoft's biggest shareholders, "Bill Gates is a
ruthless capitalist. If he wanted to, he'd walk Ballmer to the door
himself."

Mr. Gates, who founded the company in 1975, still
has 6.6 percent of its stock, making him the largest shareholder.

II. Investors Sentiment is Mixed

David Einhorn was unequivocal in his reproach of
Mr. Ballmer. He stated at the Ira Sohn Investment Research
Conference in New York City on Wednesday, "His [Steve Ballmer's]
continued presence is the biggest overhang on Microsoft's stock."

Mr. Einhorn is a particular influential voice as
he was arguably the most vocal in warning of Lehman Brothers Holdings Inc.'s
financial troubles before the firm's collapse.

Other investors expressed varying sentiments.

Whitney Tilson, founder and managing partner of T2
Partners LLC, which holds Microsoft stock, sided with Mr. Einhorn, attacking
Mr. Ballmer in a bit more reserved fashion. He comments, "This
dissatisfaction with Ballmer, with the company, is more than baked into the
stock. When you've been the top dog so long, how do you become hungry
again?"

Eric Jackson at hedge fund Ironfire Capital, a
former Microsoft investor, suggests the company is struggling slightly on
financials. But he says Mr. Ballmer remains the only clear leader at the
company, stating, "I thought the board was firmly behind Steve, and the
only way Steve was going to leave was if Steve wanted to leave. I don't see
anybody else on the management team at Microsoft that I think would be much
better than Ballmer."

U.S. equity fund manager at an investment house
featured on the list of Microsoft's top 40 largest shareholders, comments,
"What it boils down to is that Microsoft has had a load of initiatives
which haven't shown traction yet. The most recent one is to buy Skype, and the perception
on that is that it is overvalued. We won't know what revenue synergies are
until two, three years down the road."

"Microsoft created the platform on which
Google and the Internet can go forward, and it's not exactly yesterday's
technology; but they do have to connect more with the mobile computing world
and they haven't really done that."

III. If Not Ballmer Then Who?

The elephant in the room is Microsoft's thin
executive ranks. Microsoft has seen among the most executive turnoverof any
top tech firm. The company currently has a shortage of executives with
experience, entrenchment in its corporate culture.

Some blame Mr. Ballmer for this, as he has a
reputation for being a temperamental leader at times. Others blame rivals
like Apple and Facebook who are skillful at luring away Microsoft's experienced
staffers.

Regardless of the cause, the reality is that
there's a very real question -- if Mr. Ballmer was to be replaced, who would
replace him? There's no clear candidate within Microsoft, with former Software
Architect Ray Ozzie's recent departure.

An outsider remains a possibility, but results of
such experiments at other companies have been mixed. Just
askMicrosoft's web partner, Yahoo! Inc. (YHOO).

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I thought Microsoft was an extremely profitable company? The Apple bubble is deflating a bit while the Google one is inflating. In the mean time, Microsoft is going to be near parity for feature-mongers with both Apple and Google's mobile handhelds in August IIRC. Windows 8 will be a deciding moment momentum-wise, but realistically, MS has been an extremely profitable company for some time and will continue to be for another 5 - 10 years I'd say, and that's if they fail to remain relevant. Corporate legacy support ensures this and if anyone things MS will be gone or irrelevant by then must live in a nice anti-MS technology bubble and good for them I guess? The investors are just insanely hungry for more and want their money train back at full speed. I think MS will deliver, their history sort of shows they get things at their best after iterations.

quote: He's kind of a big deal. He owns one tenth of one percent afterall!

Mr. Einhorn isn't necessarily right, but your comment is childish.

Bill Gates, the largest shareholder only holds 6 percent. So holding 0.11 percent of shares is a MAJOR holding in Microsoft, considering it's such a large company with so many shares.

As to whether Mr. Einhorn's criticism is fair, MSFT is still quite profitable and its stock is very low vs. earnings. Apple has bigger profits, but has a worse stock cap to earnings ratio.

So I don't agree with Mr. Einhorn either, but for more analyticall reasons than those you state.

As far as qualitative judgements, Microsoft also seems poised to post growth in the smart phone sector, though it remains to be seen whether it can make the leap to second place than analysts predict.

With Android struggling in the tablets market, it's far from game over in that market either.

In short, Microsoft is undervalued and has strong growth potential -- Mr. Einhorn is blowing hot air. However, he IS a major shareholder so he is indeed entitled to do so, and WILL be listened to IF he raises valid (and more detailed) criticism.

At this point he's just casting vague aspersion about Microsoft's brand/image, in his public comments at least.

(He could have at least criticized Microsoft's decision to grossly overpay for the recently acquired Skype.)

A lot of articles on Dailytech wouldn't make a passing grade in and English class for the number of grammatical and spelling errors. Now who's more like a child? The person making a joke or the people who consider themselves professional journalists and can't even proof read what they write before posting it.

Maybe try not to insult your users for making a joke, especially when it wasn't even at your expense. I've never once ripped on you or your articles despite the number of errors I regularly encounter. I'm done with Dailytech after your little comment.

I wouldn't run away from here because of what Jason said. He made a well, thought out counter-reply to your own. In the spirit of DT, I suggest you come up with an equally witty and tought out response to raise the bar against him.

That's what we do here. DT isn't for wimps. ;) I know you can do it. Be the ball.

I love debating and even to the point of arguing a point, but my comment was a joke and Jason decided to not merely debate or argue back but to resort to petty tactics by calling me "childish". I've pointed this out before to other commenters on the site that their points would be taken more seriously if they cut out the name calling and pettiness. So I half expect that kind of behavior on the site in general from normal users, but not from a senior person on their staff who has been here for years.

Your comment was just text on a screen, delivery is what makes a joke a joke. How the hell do you expect written text to be interpreted as sarcasm as it is almost entirely a verbal/body language phenomenon. Blasting him for not taking a joke, when there was NO indication you were joking...come one don't be childish!!! And I'm all for some Mick bashing on occasion, but only when justly earned.

You really didn't know it was a joke? Come on, it started off with "he's kind of a big deal". You don't GET more of a give away than that these days. Using "he's kind of a big deal" is universally known as being tongue-in-cheek or sarcastic.

No I caught that to mean the writer thought he was NOT a big deal, thus why I think Mick's response was valid pointing out why he really is a big deal, and actually IS a major stock holder even at 1/10 of 1%.

So what was the Joke? Was the sarcasm implying him to be a minor player a joke? Or was it not sarcasm (which I agree it is obvious it was)? See what I mean, text is crazy hard to tell what he was joking about? I (and Jason) thought he was serious in that he thought this guy was a nobody, by the "he's kind of a big deal" comment. As you suggest it clearly implies that the author does not think much of the guy. I disagree, 1/10 of 1% of MS stock means that statement is quite literal he is in fact a big deal.

quote: (He could have at least criticized Microsoft's decision to grossly overpay for the recently acquired Skype.)

And he would have been wrong, again. Microsoft did not overpay. It's not about how much Skype is "worth" as a single piece of tech and namesake. Microsoft needs to bulk up to compete with Google's cloud services, and Skype will be KEY in doing so.

Skype, like Google Voice which is tightly integrated into Android, will be folded into the mobile operating system to give full mobile VOIP capabilities that will most likely tie in with Microsoft’s server products ex. Exchange server for storing voicemail along email, voice recognition, transcription services, etc.) , just as Google purchased Grand Central to turn it into Google Voice to move vast amount of profitable mobile telephony services out of the reach of telcos and totally to Google’s cloud – leaving only data services to the telcos.

Ten years from now all these armchair quarterbacks who thought they "overpaid" for Skype will be scratching their heads, while REAL experts will be looking back on one of the best moves Microsoft has ever made.

OMG That's one of the first REALLY smart comments about business strategy in a MSFT threat I've ever seen.A lot of people can say that Ballmer is no techie, and probably they would be correct, but he has an iron fist and smart bomb in his pocket when it comes to business.+5

Profitable yes, but the stock was trading at 60 times profits in 2000, then 40 times profits, then 20 times profits and now 9,85 times profits. And that multiple is an indication of the growth rate investors think the company will have. In short: yes it makes profits but investors think MS has hit the ceilling and the good days are behind it.

Of course, the market is always wrong. In 2000 the market was expecting exploding growth, which did not happen. Even when Vista came out the market expected like 20%-30% annual growth, which did not happen. Now the market expects the end of microsoft, which might not happen either.An old saying is that analysts are good at forecasting what happened yesterday.

At that price, i'm a buyer! You still get a 2,5% dividend, way more than what you get if your money sleeps in a checking account.

Growth is a major component of a stock's price. Apple currently makes more gross and net revenue than Microsoft, and their year-over-year revenue growth still has zero signs of slowing down. It is the same reason IBM's stock has been on such a tear lately, very rapid growth in back end and in services.

Microsoft is insanely profitable (very little out there has the pure profit margins that software does), but it is completely on the backs of operating systems and office software. They make loads of cash but it is in mature and saturated markets that don't have the potential for growth that they did fifteen years ago.

On the plus side, low investor sentiment means that this may be a very good time to buy some MSFT. At worst you are stuck with a low-dividend stock, but it is trading near the bottom of a 10 year range and it may have a resurgence at some point. Now's as safe a time as any IMHO.

MS is far from irrelevant, they are the steady rock of the tech and business world. For anyone to think MS is going away in even 10 years is coepletely nuts. XP is 10 years old and I know a LOT of huge corporations still running that OS, they won't be going anywhere anytime soon. MS isn't even trying to take over the world, they are happy to be making money hand over fist and being one of the largest corporations in the world - there will be plenty of hits and misses over the next decade. Look at Xbox, who would have thought MS would come in from no where and dethrone Sony and Nintendo so quickly???